USD/CAD - Canadian Dollar Playing Defence

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U.S. President Trump used his executive power to help support unemployed workers. He announced he would provide COVID-19 relief benefits of $400.00 per week, and asked that States add $100.00 to the payment. He also delayed the employee portion of payroll taxes from August 1 to December 31, 2020. Democrats are questioning the legality of the move.

The news helped lift European equity indexes, and S&P futures point to a positive open on Wall Street. Asia equity markets were subdued as Japan and Singapore were closed. China announced it would sanction 11 Americans, including Senators Marco Rubio and Ted Cruz. Beijing justified the actions saying, "In response to the U.S.’s wrong behaviors, China has decided to impose sanctions on those individuals who behaved badly on Hong Kong-related issue."

The U.S. dollar was already in demand following Friday’s U.S. employment report which surprised to the upside. US employment rose by 1.8 million while the unemployment rate dipped to 10.2%. As of July, total non-farm employment is 12.9 million, which is still lower than what is was in February.

The Canadian dollar was undermined by the U.S. results and didn’t get any benefit from the somewhat robust domestic employment results. Canada added 418,500 jobs in July, for a three-month gain of 1.67 million. The unemployment rate fell 1.4% to 10.4%, the second consecutive decline.

Chinese data helped support AUD/UAD and NZD/USD, which were suffering from risk aversion selling pressure.

China’s Producer Price Index and Consumer Price Index reports were a tad better than forecast. USD/JPY traded quietly and consolidated Friday’s gains near the top of its range.

EUR/USD continues to retreat after failing to extend gains above $1.1900 last week. Prices are undermined by rising speculative long EUR/USD positioning, and risk aversion demand for U.S. dollars because of China/U.S. tensions. There are reports of €3.0 billion in option expiries today, which should cap topside moves until 10:00 am.

BPUSD is trading in the middle of its $1.3020-$1.3086 range ahead of Tuesday’s U.K. employment report and the Q2 Gross Domestic Product report on Wednesday.

Canadian dollar direction continues to be at the whim of broad U.S. dollar sentiment. USDCAD is trapped in a 1.3230-1.3510 trading range.

Canadian dollar sentiment is bearish due the US imposing tariffs on Canadian aluminum imports.

There are not any Canadian or U.S. data releases on tap today.
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